NORFOLK, Va. — The best time to save is now, especially when it comes to your kid's education.
But it can be hard to figure out how much to save or what resources to tap into when you need help. I am taking these questions to financial experts to see what they suggest when it comes to saving for college.
When should you start saving?
Scott Ridgely is the Chief Marketing Officer at Virginia529 and says, “There's no wrong answer to that question. It's never too early and it's never too late is what we tend to tell parents that ask us that question, but the reality is that most people start to save around six or seven years old. That's about the average age of an account we create for a Virginia529 account.”
He says that’s around the age that students enter kindergarten and parents have the bandwidth to start thinking about the future and what’s going to happen when they graduate high school.
However, if you have the financial capacity to start saving before the child is born, you’ll only save more over time.
How do you know how much money to save?
Ridgely says to first look at your family's financial situation and see what works best for you. He says it’s important to realize that you're not tied into anything and can change your contributions at any time.
“We try to make it as flexible as possible for families. The lowest amount that you can contribute is $10 to open your account, so it's not like you're having to accumulate thousands of dollars to open up this account,” says Ridgely. “So, we tell people to get started with that $10 and make a contribution when you can."
Even if you only save enough to cover room-and-board, or books, it’s still better than nothing.
“If you need to take a couple of months off, if rent is backlogged and you don't have [the money], if you've lost your job [or] if there are some other unplanned expenses, that 529 [account] should not be a burden for you. So, put the money aside when you have time, but also realize that there's other expenses in life that come up," says Ridgely.
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Can you only use funds for Virginia colleges?
No, you can use the money for schools and programs across the country. The money is also flexible after you graduate.
“Really, you can continue [to use it] afterwards to pay for graduate school, you can pay for future certifications, or you can carry some of those funds over to another sibling [or] another family member in the future. So, there’s a lot of flexibility there,” Ridgely says.
He tells me some people contribute once or twice a year while others take money out of a paycheck each month.
When it comes to saving for multiple kids, Ridgely says it’s even more important to save ahead of time.
He says, “I have three kids in my house right now and I'm gonna have three kids in college at one point. So that's going to be a real tough timeframe. But for us, we've worked it out by planning ahead of time and by kind of frontloading a little bit of money for the first child that's gonna attend college. So, we're putting more money into his account right now and the other ones are still getting a contribution, but we tend to ramp that up when they get closer to graduation age.”
Can you only use the money for colleges?
No, you can use a Virginia529 account several ways.
Ridgely says you can use it for a four-year college, a two-year college, or a trade or technical school.
He adds, “Right now you can also use a 529 for a K-12 education - so up to $10,000 per year you can use for private K-12 tuition.”
The main takeaway is to plan ahead and start as soon as you can.
“Every dollar you save now is a dollar that you don't have to borrow in the long run and that's what families should be thinking about - lessening the amount of loan debt you're taking on," says Ridgely.
During this report, I focused on a 529 plan, but there are other investment accounts that you can open to start saving -- like an Education Saving Account, a Uniform Gifts to Minors Act (UGMA) or a Uniform Transfers to Minors Act (UTMA). UGMA or UTMA are accounts where property is set aside for a minor’s benefit.
Also don’t forget to apply for student aid and scholarships when the time comes.
